Invesco and MassMutual Life Insurance Company announced today that they have entered into an agreement for Invesco to buy OppenheimerFunds, the advisor to the Oppenheimer family of mutual funds, from MassMutual. MassMutual and the employee shareholders of OppenheimerFunds will receive a combination of common and preferred stock worth about $5.7 billion, and MassMutual will become Invesco’s largest shareholder, with a roughly 15.5% stake. In addition, MassMutual will have representation on Invesco’s board of directors; MassMutual says it will nominate William F. Glavin Jr., former CEO of OppenheimerFunds and currently an independent board member there, as its representative.
The firms said they expect that the transaction will close in the second quarter of 2019, pending approvals from regulators and other parties.
The deal would increase Invesco’s total assets under management to $1.2 trillion, with $680 billion in U.S. retail assets under management, as OppenheimerFunds’ $225 billion is added to Invesco’s $455 billion.
Midsize fund firms have been combining in recent years in part because of competition from low-cost exchange-traded funds offered by a few giant companies such as Vanguard and BlackRock. Many fund company executives as well as outside observers believe that only larger firms will survive this process, leading to consolidation. For example, Janus and Henderson merged in May 2017, and Standard Life bought Aberdeen in August 2017. In fact, since 2006, Invesco itself has acquired PowerShares’ exchange-traded funds, the Van Kampen fund lineup from Morgan Stanley, the ETF lineup from Guggenheim, and another ETF group from Source of the United Kingdom.
The firms have not made any decisions about integrating the families’ fund lineups, including whether some funds might be merged or liquidated in areas where there is overlap. The firms are strong in similar areas, notably foreign equities, and weak in similar areas, notably municipal bonds. Both firms have considerable assets in high-yield munis, and the merger will significantly increase Invesco’s already heavy exposure to U.S. large-cap equities, which have experienced heavy outflows as investors have moved to cheaper, more-passive options.
For more details, see Looking at a Possible Merger Between Invesco and Oppenheimer.